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TCS: Currency Volatility Plays Spoilsport - Views on News from Equitymaster

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TCS: Currency Volatility Plays Spoilsport
Jul 14, 2017

India's largest software firm, Tata Consultancy Services (TCS) has announced its financial results for the first quarter of FY18. The company has reported a 0.2% QoQ decrease in consolidated sales while the consolidated net profit was up 1.7% QoQ.

Performance Summary
  • Revenues decreased by 0.2% QoQ in 1QFY18 in rupee terms. Revenues increased by 2% QoQ in constant currency terms and by 3.1% QoQ in US dollar terms. Volumes were up by 3.5% QoQ.
  • The operating margin was under a bit of pressure due to wage hikes and the appreciation of the rupee. It was down sequentially to 25.1% 1QFY18. The operating profit decreased by 8.8% QoQ.
  • The other income decreased by 3.8% QoQ and came in at Rs 9,590 million for the quarter.
  • The net profit for the quarter came in at Rs 60,980 million, up 1.7% QoQ. The net margin was 20.6%
  • The management has declared an interim dividend of Rs 7 per share.

    Consolidated Financial Snapshot
    (Rs m) 4QFY17 1QFY18 Change
    Sales 296,420 295,840 -0.2%
    Expenditure 215,100 221,710 3.1%
    Operating profit (EBITDA) 81,320 74,130 -8.8%
    Operating profit margin (%) 27.4% 25.1%  
    Other income 9,970 9,590 -3.8%
    Finance Costs 80 270 237.5%
    Depreciation & amortisation 5,050 4,990 -1.2%
    Profit before tax 86,160 78,460 -8.9%
    Tax 19,940 18,960 -4.9%
    Profit after tax 66,220 59,500 -10.1%
    Minority Interest 120 100 -16.7%
    Other comprehensive income -6,120 1,580  
    Net Profit 59,980 60,980 1.7%
    Net profit margin (%) 20.2% 20.6%  
    No. of shares   1,970.4  
    Diluted earnings per share (Rs)*   130.5  
    P/E ratio (x)*   18.7  

    *On a trailing 12 months basis


    Segmental Summary
    By Domain 4QFY17 1QFY18 Change
    BFSI 97,522 97,331 -0.2%
    Retail & CPG 36,460 36,092 -1.0%
    Communications & Media 21,342 21,596 1.2%
    Manufacturing 21,935 22,188 1.2%
    Life Sciences & Healthcare 20,453 21,005 2.7%
    Energy & Utilities 10,968 11,834 7.9%
    Travel & Hospitality 10,078 10,354 2.7%
    Technology & Services 23,121 23,371 1.1%
    Regional Markets & Others 54,541 52,068 -4.5%
    By Market      
    North America 157,992 155,316 -1.7%
    Latin America 6,225 6,213 -0.2%
    UK 40,610 41,122 1.3%
    Continental Europe 34,978 36,980 5.7%
    India 20,157 20,709 2.7%
    Asia Pacific 28,753 28,105 -2.3%
    MEA 7,707 7,396 -4.0%
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